Cadiz is a specialist local fixed-income manager providing investment solutions to both the retail and institutional market, whose philosophy is to provide incremental outperformance over time within defined risk parameters.

Bond yields across major markets were mixed in June. In Europe, 10-year yields in Germany and France rose by 13 and 11 basis points, ending the month at 2.61% and 3.28%, respectively. In contrast, the UK 10-year yield fell by 16 basis points to 4.49%, while the US 10-year yield declined by 17 basis points to 2.23%.

The Federal Reserve kept interest rates unchanged, maintaining a cautious stance amid trade tensions and inflation risks, while the European Central Bank cut rates by 25 basis points to 2.00%, signalling openness to further easing depending on economic data. Meanwhile, the Bank of England (BoE) held rates at 4.25% despite some members advocating for a cut due to weakening demand and trade concerns. The Bank of Japan maintained rates at 0.50% having raised rates earlier in the year, citing global economic uncertainties as the reason for their decision.

Locally, headline CPI inflation printed at 2.8% y/y in May, unchanged from the previous month. June was not a Monetary Policy Committee (MPC) meeting month for the South African Reserve Bank (SARB), but we continue to see scope for another rate cut before year-end, should conditions allow. While low inflation creates room for potential easing, heightened geopolitical risks and recent oil price volatility suggest that, if a cut does materialise, it is more likely to come later in the year.

Looking ahead, we believe local economic fundamentals continue to support a lower yield environment over the medium term. Domestic growth remains subdued, and inflation is expected to stay contained in the near term. Monetary policy is likely to remain accommodative, creating room for further downward pressure on yields. The global backdrop is less supportive, however, with ongoing geopolitical uncertainty and the risk of ongoing tariff disputes posing potential headwinds. We therefore maintain our holistic investment approach which is anchored in macroeconomic fundamentals and responsive to evolving policy signals.

The Cadiz BCI Money Market Fund remained aligned with its mandate and continued to deliver competitive returns for the month of June. While interest rates continued to decline, the fund is well positioned within the short-term investment space. Its strategy includes a targeted allocation to high-quality corporate credit to enhance yield, while maintaining full compliance with mandate parameters and taking no undue risk. Over the long term, the fund has consistently outperformed its benchmark, the Alexander Forbes Short Term Fixed Interest (STeFI) Composite Index, while preserving liquidity and minimising return volatility. At the end of June, the forward yield on the fund was 8.13%.

The Cadiz BCI Enhanced Income Fund benefitted from its exposure to nominal bonds as yields continued to decline in June. The fund’s duration was increased to take advantage of this trend, which contributed positively to performance. Credit spreads and corporate paper remain tight, with demand continuing to outstrip supply. Nonetheless, the fund was able to participate in select opportunities within this space, further supporting returns. Trading activity during the month was primarily driven by cash flows, portfolio positioning, and reinvestments, all in line with the fund’s objectives. At the end of June, the forward yield of the fund was 8.79%, with an effective duration of 0.61.

The Cadiz BCI Absolute Yield Fund’s exposure to nominal bonds was the primary driver of performance in June, further supported by a decline in bond yields amid easing global trade tensions. Additional contributions came from the fund’s holdings in inflation-linked bonds and corporate credit. Trading activity during the month focused on cash deployment, portfolio positioning, and reinvestment of maturing instruments. Duration sensitivity was increased in line with the investment strategy and prevailing market conditions. The fund remains actively managed to capitalise on opportunities and manage risk effectively. At the end of June, the forward yield of the fund was 8.83% and duration was slightly shorter at 1.90.

The Cadiz BCI Bond supported by declining bond yields delivered a positive return for the month of June. Local factors such as easing political uncertainty and a favourable inflation outlook also contributed to the improved market sentiment. The bulk of the return came from the long end of the yield curve, as the market recovered from the negative tone seen earlier in the year. The FTSE/JSE All Bond Index (ALBI) posted a positive return for the month and is up 6.62% year-to-date. The fund participated in this rally and remains strategically positioned to take advantage of further opportunities across the curve. At the end of June, the forward yield of the fund was 9.53% while duration was lengthened to 5.99.